Correlation Between Vietnam National and Phuoc Hoa
Can any of the company-specific risk be diversified away by investing in both Vietnam National and Phuoc Hoa at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vietnam National and Phuoc Hoa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vietnam National Reinsurance and Phuoc Hoa Rubber, you can compare the effects of market volatilities on Vietnam National and Phuoc Hoa and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vietnam National with a short position of Phuoc Hoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam National and Phuoc Hoa.
Diversification Opportunities for Vietnam National and Phuoc Hoa
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vietnam and Phuoc is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam National Reinsurance and Phuoc Hoa Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phuoc Hoa Rubber and Vietnam National is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vietnam National Reinsurance are associated (or correlated) with Phuoc Hoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phuoc Hoa Rubber has no effect on the direction of Vietnam National i.e., Vietnam National and Phuoc Hoa go up and down completely randomly.
Pair Corralation between Vietnam National and Phuoc Hoa
Assuming the 90 days trading horizon Vietnam National is expected to generate 2.28 times less return on investment than Phuoc Hoa. But when comparing it to its historical volatility, Vietnam National Reinsurance is 1.21 times less risky than Phuoc Hoa. It trades about 0.13 of its potential returns per unit of risk. Phuoc Hoa Rubber is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 5,280,000 in Phuoc Hoa Rubber on December 29, 2024 and sell it today you would earn a total of 1,520,000 from holding Phuoc Hoa Rubber or generate 28.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Vietnam National Reinsurance vs. Phuoc Hoa Rubber
Performance |
Timeline |
Vietnam National Rei |
Phuoc Hoa Rubber |
Vietnam National and Phuoc Hoa Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vietnam National and Phuoc Hoa
The main advantage of trading using opposite Vietnam National and Phuoc Hoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vietnam National position performs unexpectedly, Phuoc Hoa can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Phuoc Hoa will offset losses from the drop in Phuoc Hoa's long position.Vietnam National vs. Transport and Industry | Vietnam National vs. Transimex Transportation JSC | Vietnam National vs. Din Capital Investment | Vietnam National vs. Long Giang Investment |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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